Appropriate key performance indicators will help you understand how well your organization is executing the processes that will foster customer success, satisfaction, and loyalty.
In this article, you will learn how you can start implementing the main KPIs of customer success in the SaaS business model that are effective for long-term development.
Understanding Customer Success KPIs
Customer success KPIs are more tangible metrics that help organizations evaluate the achieved level of customer satisfaction and success as well as the organizationโs performance regarding the above goals.
These metrics are crucial in establishing strengths, opportunities, and where strategies should be placed to meet or exceed the expectations of the customers.
KPIs for Customer Success in SaaS That You Need to Analyze
1. Net Promoter Score (NPS)
Net Promoter Score is a measure of the level of client loyalty; it can tell who the raving fans or advocates are and who are the detractors, the people who push others from your brand.
Measuring the Net Promoter Score
Start with an NPS survey consisting of just one question: โโOn a scale from 1 to 10 how likely are you to recommend brand X to a friend or a family member??
The client can answer on a scale of 0-10 how likely they are to recommend your business to their close ones:
- Scores of 0-6 are the detractorsโthe unhappy consumers who are likely to discourage others from buying from you
- A score of 7-8 is passiveโthey are satisfied with your service but not enough to promote you
- The score of 9-10 are promotersโloyal and enthusiastic about your products and services, they will recommend you to others.
2. Customer Lifetime Value (CLV)
This is one of the customer success managerโs metrics.
It shows you a prediction of how much an average consumer will spend on your products and services over their entire relationship with your organization.
How to calculate CLV?
To calculate your customer lifetime value:
- First, take your total revenue and divide it by the number of buys. Thatโs your average order value (often abbreviated to AOV).
- Next, divide the total number of buys by the total number of unique customers. Thatโs your purchase frequency rate.
- Lastly, the average customer lifetime is the number of days between the first and last order date, divided by 365 (to convert into years).
- To finish off, multiply these numbers.
3. Customer Acquisition Cost (CAC)
Track customer acquisition cost (CAC) so as not to let your spending spin out of control. This important customer success metric shows you how much it costs you to acquire a new client.
How to calculate CAC?
You can measure your customer acquisition costs by:
- Adding the cost of sales and the cost of marketing
- Then, dividing the sum by the number of new customers acquired
4. Churn Rate
You can use churn metrics to see on average how many of your customers end their relationship with your brand.ย
When do you know a client churned?
Typically, churn clients are identified when the customers no longer subscribe to your companyโs services or when they have not made any purchases from your business for a specified time.
It is up to the business owners to decide individually how long that period should be in their businesses.
How to measure churn rate?
To calculate customer attrition rate:
Calculate the difference in the number of clients between two dates at the start of a month and the end of it.
Next, you divide the result by the number of clients at the start of the month.
5. Customer Satisfaction Score (CSAT)
CSAT or the customer satisfaction rate is considered one of the most effective customer success metrics to guide you in determining the level of satisfaction of your clients starting from the onboarding process. It enables you to attach a figure to your consumersโ contentment with your products and services.
How to measure a customer satisfaction score?
“To calculate the customer satisfaction score, you initially ought to design the customer satisfaction questionnaire with answers on the Likert scale.”
This scale is an open-ended, numerical, or verbal scale that is used to capture the respondentโs opinion or perception.
More frequently the results differ within the range of 5-7 or 7-9 if there is a numerical scale or โstrongly agreeโ to โstrongly disagreeโ if itโs a word scale.
6. Customer Retention Rate
By measuring customersโ success, SaaS companies are informed of how many of these consumers remain rather than one-time buyers.
You can combine it with your churn rate and you will be in a good position to compare the number of clients who are leaving with those who are remaining.
How do you calculate the customer retention rate?
To measure this customer success KPI:
- First, fix a time frame within which you would like to calculate your customer retention rate it could be monthly, quarterly, or for six months.
- Deduct the number of inbound customers at the close of the said month from the new clients you gathered in the period.
- Then divide that amount by the number of clients at the beginning of that month
- Finish your equation by multiplying the score by 100
Case Study: HubSpot
HubSpot is a leading provider of inbound marketing, sales, and customer service software designed to help businesses grow.
Challenge: HubSpot needed to reduce its customer acquisition costs while maintaining high levels of customer satisfaction and retention.
HubSpot deployed a comprehensive customer success strategy, including:
Personalized Customer Journeys: They used data analytics to tailor customer interactions and provide personalized recommendations.
Customer Education: HubSpot invested in creating a rich library of educational content, including webinars, tutorials, and knowledge-base articles.
Customer Feedback Loops: This is a system that they created to enable them to get feedback constantly and enhance their operations.
Results Achieved
- Lower Acquisition Costs: Personalized journeys and strong educational resources led to increased word-of-mouth referrals, reducing the need for extensive marketing spend.
- Higher Retention Rates: Improved customer satisfaction and engagement resulted in a 30% increase in retention rates.
- Revenue Growth: HubSpot experienced a 25% increase in revenue, driven by the combination of lower acquisition costs and higher customer retention.
Implementing and Tracking Customer Success KPIs
Establishing Clear Goals
Before the tracking of KPIs, it is necessary to define the goals that have to be achieved in clear and measurable terms.
Pinpoint what success means to your customer success team and make sure that it is in congruence with your top goals.
Utilizing Data Analytics
Customer data can be collected and analyzed with the help of such tools as data analytics. This will be of great help in comprehending the behavior, choices, and grievances of the customers, thus enabling resolutions to be made based on more concrete facts.
Regular Reporting and Review
Give specific attention to tracking your KPIs and assessing their trends frequently.
This ongoing analysis helps you modify the strategies to flow improve and grow steadily.
Cross-Department Collaboration
Encourage cross-departmental communication so that all the efforts towards the customers are well-coordinated.
This includes cooperation between sales, marketing, and product teams that must integrate and create a customer experience that will lead to satisfaction and loyalty.
Final Thoughts
Customer success-driven growth strategy cannot be a one-time thing, it is a process. Hence, by analyzing the more appropriate KPIs such as CSAT, NPS, LTV, churn rate, as well as expansion revenue, youโre sure to gain a wealth of information about your customers and ensure long-term success.
Please remember this is all about knowing your customers, working with the data you have at your disposal, and making small but constant improvements where necessary.
